This chapter reviews the opportunities and issues a company will face when conducting business in the global marketplace. With the ever-increasing dynamics of international trade, you should read this chapter carefully. It is an excellent starting point to consider the skills required to expand your business internationally.
International business offers substantial potential risks and returns from an organizational perspective.
Recognize the complex factors that may impact an organization's strategic decision to expand internationally
Or a multinational enterprise, MNEs are defined as organizations which operate across multiple political borders.
International business is an enormously relevant facet of the modern economy, and will only become more integrated into core business strategy as technology continues to progress. International business is simply the summation of all commercial transactions that take place between various countries (crossing political boundaries). This is not exclusively limited to the domain of business, as NGOs, governments, and coops also operate across country borders with a variety of objectives (aside from simple profitability).
From a business perspective, the primary incumbent in an international business environment is the multinational enterprise (MNE), which is a company that pursues strategic success in global production and sales (i.e. operating within a number of country borders). The number of examples of this type of firm is constantly growing. From fast food chains like McDonald's to auto manufacturers like Honda to smartphone designers like Samsung, the number of international players in most markets is constantly on the rise.
Global expansion is costly and complex. To offset these costs and risks, organizations must have strong reasons for developing a global strategy. These reasons generally fit one (or more) of the following three strategic areas:
International expansion can be a costly and complex procedure. Before considering such a significant strategic move, management must weigh the external factors that will impact success during a global transition. These include:
Weighing the pros and cons of entering a given reason, and calculating projected cash flows, costs, and required returns on investment are central financial considerations to entering a new international market.
Volume of Merchandise Exports
Despite a dip in 2008 as a result of the banking crisis and subsequent recession, the volume of global exports continues to rise even over this short time period. Globalization is an enormous source of growth.